Last night, the FTSE 100 closed with a seventh consecutive all-time high, rising 0.2%, or 14.74 points, to close for the first time ever at over 7,200 (7,210.05). This is approaching the longest run of consecutive closing highs, which was recorded in May 1997, when the FTSE 100 finished at all-time peaks for eight straight sessions. It also represents the fifth straight week of gains.
This sustained level has been encouraged not just by the weak pound but also by upbeat news, first from manufacturing, then construction and now by the services sector, which grew at its fastest pace for 17 months in December 2016.
The respected Markit/CIPS purchasing managers index (PMI) for services grew in December to 56.2, from 55.2 in November and was the fifth month running that the index was above the 50 mark, which separates growth from contraction. The results are supported by a separate survey of businesses by the British Chambers of Commerce.
The PMI also predicts that GDP growth of 0.5% was achieved during the final quarter, following the 0.6% growth in the third quarter, once again defying the expectations of a Brexit slowdown.
Across the pond, the Dow Jones is also flying high, almost breaking the 20,000 barrier in intraday trading, reaching 19,999.63 before falling back a tad to close at 19,963.80, up 0.32% up on the day.
So what are the prospects for investors in 2017? As our last article indicated, there are plenty of events that could create uncertainty and lead to volatility – the triggering of Article 50, Trump taking up power, elections in the Netherlands, France and Germany, plus possible further tensions between the West and Moscow and a slowdown in China.
The consensus from the ‘experts’ is that developed markets will outperform emerging markets, with the US leading the way after aggressive tax cuts and a big infrastructure programme. They also feel that European stocks look cheap but could be affected by any surge of populism in the elections. After 2016, which saw emerging markets become one of the strongest performing investment areas, it is expected that they may be affected somewhat in 2017, should the mooted protectionism of Trump actually come into play. However, despite their innate volatility, emerging markets can still have a place in an investment portfolio planning for the long-term.
Bonds meanwhile keep ticking over and could be affected by rising interest rates, but whilst government bonds don’t look great value, corporate bonds can offer yields of 3-4% and strategic bond funds give fund managers the freedom to invest across the whole bond market, either to seek the best returns or to limit risk.
So there is much to think about as we set off in 2017. For help or advice about your investment plans going forward, contact Kellands.